Two reasons why taxis should charge higher rates after St Jude

Many will baulk at the idea of cab drivers charging higher rates as public transport networks suffer in the wake of today's storm - and indeed in many cases rates rules prohibit them from doing so. This does not appear to be stopping all enterprising drivers:

But if this does profiteering does disturb you, can you suggest a better way for a scarce resource (travel to work) to be rationed in the wake of a natural disaster?

There are reasons to suggest that rate flexibility and liberalising supply rules are the best way to tackle the shortage.

If taxis were cheaper, there'd be none left

Higher prices will reduce demand for taxis, meaning that we don't see queues for them. Instead of rationing goods by the principle of "first come, first served", goods are distributed to those who want them more (and as such will be willing to pay more).

So taxis go to where they are more needed - rather than those who ask for them first.

Higher prices will mean more entrants to the market

As prices go up, we should see more people offer to take commuters to work with their vehicles. Supply should rise, and that allows prices to fall back down to a lower level.

But as with rules that stop taxi drivers charging higher rates, rules that prohibit others from offering their services as taxi drivers stop this mechanism working.

For those who want to read more on the subject, see Matt Zwolinski's paper "The Ethics of Price Gouging".

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